The government’s move to reduce the stamp duty for shares traded on Bursa Malaysia Securities to 0.10% of contract value effective July is expected to attract more investors into the market moving forward, economists said.
Bank Muamalat Malaysia Bhd chief economist and social finance head Mohd Afzanizam Abdul Rashid said the measure, which was announced by Prime Minister Datuk Seri Anwar Ibrahim today, is aimed at lowering the securities transaction cost for investors.
“(It would) encourage investors to come in and invest in Bursa Malaysia, be it the institutional and retail-based investors.
“When there are more players in Bursa Malaysia, it will improve the liquidity of the stock market and thus help promote a better price discovery mechanism for the listed share prices,” he said in response to the announcement that the stamp duty rate, currently at 0.15% per cent, is being reduced to 0.10% subject to a maximum cap of RM1,000 per contract.
Afzanizam said the prime minister also remains committed to pursuing structural reforms as a means of attracting high quality investments.
This, he said, was clearly seen from the announcement to implement reforms this year to make it easier and faster to list on the exchange by expediting the initial public offering (IPO) process and reducing time-to-market.
“In a nutshell, it’s a medium- to long-term reform which, if executed well, would improve the potential growth for Malaysia. Investment is always a key component for the economy as it will encourage innovation and better productivity gains,” he noted.
During the launch of InvestEd – the new name of the Capital Market Graduate Programme – today, Anwar, who is also finance minister, announced several measures to beef up the capital market and create more wealth for the people.
Apart from the stamp duty reduction and facilitating the listing process, the government will also look at policies aimed at attracting family offices to set up in Malaysia and promoting corporate venturing through more facilitative tax and incentive policies.
Anwar said the lower stamp duty rate will directly reduce the cost of securities transactions and make the Malaysian stock market more competitive.
The prime minister also said the increase in market liquidity will attract more domestic and foreign funds into the Malaysian stock market, thereby encouraging small and medium-sized enterprises to pursue IPOs and facilitating public-listed companies in raising funds to expand their businesses and create more jobs.
Meanwhile, Universiti Keusahawanan Koperasi Malaysia’s Assoc Prof Abu Sofian Yaacob said despite being a good recipe to boost the capital market, the announced measures need to be translated into action.
“One factor that has a direct influence on the capital market is the stability of the government of the day. Investors would like to see a stable and receptive government.
“Another factor is a stable foreign exchange rate compared to the major currencies. It would give an indication as to the profitability translation with the home country’s currency,” he said.
Abu Sofian said the government should also encourage and facilitate local investors and enterprises to invest more, especially in new and innovative economies.
Meanwhile, UOB Kay Hian Securities (M) Sdn Bhd head of wealth research and advisory, Mohd Sedek Jantan, said the immediate impact of the lower stamp duty is encouraging greater participation of local investors in the capital market.
He said potential effects may be wide-ranging.
“Although (market) volatility may rise with the increased transactions, the situation may only be temporary. The impact of the lower stamp duty on volatility is unclear, and in some cases may be positive.
“This is due to the market being occupied by a sufficient number of rational, fundamental traders whose trading could stabilise the market by moving prices closer to the (stocks’) true underlying values,” he said.
